Shares of Nio (NYSE:NIO) stock have accelerated higher by over 30% this week. This followed an investment promise from China’s National Development and Reform Commission (NDRC) to support internal industries such as transportation, clean energy and infrastructure.
Volkswagen’s (OTCMKTS:VWAGY) investment in Xpeng (NYSE:XPEV) may have also helped spur the surge in NIO stock. Earlier this week, Xpeng disclosed a $700 million investment from Volkswagen in exchange for a 4.99% stake in newly issued shares. The two automakers will also develop two B-class battery electric vehicles (BEVs) for sale in China. These vehicles will be sold under the Volkswagen brand.
The spike in NIO comes amid a hedge fund exit of Chinese American Depository Receipt (ADR) shares. According to Morgan Stanley, U.S. hedge funds have sold off approximately $700 million worth of Chinese ADRs this week. This follows the Nasdaq Golden Dragon index’s monthly gain of 11%, which is a basket of stocks Chinese stocks that trade publicly in the U.S. At the same time, both NIO and XPEV have remained relatively resilient in the face of the selloff. Bloomberg reports that the two companies have experienced “meaningful short covering.”
Why Is NIO Stock Up 30% This Week?
As of July 15, there were 116.27 million shares of Nio sold short with a value of $1.23 billion. That represents a short interest as a percentage of float of 7.69%. Generally, a short interest of 10% is viewed as high. Meanwhile, a short interest of 20% is viewed as very high.
Nio’s price appreciation is interesting, as the electric vehicle (EV) company recently reported disappointing metrics for June. For the month, Nio delivered 10,707 vehicles, a decline of 17% year-over-year (YOY) compared to 12,961 deliveries. For the three months ended June 30, the company delivered a total of 23,520 vehicles, down by 6% YOY compared to 25,059 vehicles. Shareholders may be holding on to the fact that Nio is recently began deliveries of its ET5 Touring and ramped up deliveries for the ES8 SUV.
In addition, Nio recently held its Power Day 2023 event. This event was also somewhat of a disappointment. Shareholders had expected to receive new details about Nio’s new 150-kWh battery pack. However, the company did disclose that it had installed 1,564 battery swap stations in China and that construction of these stations will begin in Europe this year.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
